The Buying Process

Understanding the Buying Process – New Jersey & Pennsylvania

Understanding the Buying Process

Regardless of whether you are a first time, “move-up”, investment or second home buyer, it is beneficial to review the buying process so that you are prepared for each step. The following applies to most home purchases. Please visit our Buying a Country Home page for additional information on issues that are specific to rural or country homes.

The following are the general steps for purchasing a home. There are differences between Pennsylvania and New Jersey, and your River Valley agent can review more specific state information with you.

Review financing and prequalify for a loan if applicable.

If you are a cash buyer, you should have your bank or financial advisor prepare a document indicating that you have the means to purchase. If you are financing your home, you should meet with a mortgage broker to discuss terms, rates and programs that you qualify for, and ask for a Prequalification letter. When a financial institution pre-qualifies you, they are determining your mortgage threshold, or what you ought to be allocating on a monthly basis towards the purchase of a home. This is determined by income, debt and other variables. This pre-qualification letter translates in buying power when it comes time to negotiate an offer to purchase, because it provides assurance that you are qualified to buy a home. In PA, there are often additional disclosure forms that need to be completed.

Define what you want, and visit properties.

Now that you have identified a price range that meets your home buying budget, it is time to think long and hard about the property you would like to own. First, narrow down your area by considering school systems, recreational amenities, commuting distance, public transportations, great restaurants or shopping… whatever your priorities are. Distinguish between what you would like to have and what you absolutely require. Having three bedrooms might be a requirement, but wanting the master bedroom to have a balcony will most likely fall under “like to have.” Think about both interior and exterior features. Review online listings, and meet with your River Valley agent to fine tune your criteria. Soon, it will be time to go out and view properties in person. Make an effort to look past decorating styles, and focus on interior qualities such as density and flow, condition of fixtures, and room sizes. Pay close attention to equity. Walk the exterior of the property noting topography, soils, drainage, condition of wooded areas and outbuildings. You should consider if you have the time, talent or inclination to make changes to the home, or if you are only interested in move in condition properties.

Make an offer.

Once you have found the right home, it is time to put your intentions to purchase in writing. This is called an Offer to Purchase, and will be completed by your River Valley agent. Components of this offer include: the good faith deposit, home inspection and other contingency (“subject to”) dates, additional deposit dates, closing dates, the type and amount of financing, and the inclusions and exclusions of the sale. River Valley uses the industry’s standard Offer to Purchase developed by the New Jersey and Pennsylvania Association of Realtors, and the Pennsylvania Association of Realtors Standard Agreement for the Sale of Real Estate. This offer also includes the type of deed that will be transferred, a legal description of the property, condition of title, environmental disclosures and walkthrough provisions.

Negotiate and finalize the offer and Attorney Review.

Further negotiation might be necessary with the seller, and this is usually done verbally with the seller’s agent. These are called offers and counteroffers, which are common in real estate transactions. Once both parties have reached an agreement the offer to purchase is revised to reflect those terms and signed by all. In New Jersey, the attorney review period starts once both the buyer and seller have received these fully executed copies of the contract. During this period, the attorneys that are representing both you and the seller will communicate and make revisions to ensure it is written in a fair and concise way to avoid confusion. Until this period ends, either buyer or seller may terminate the contract for any reason they choose without penalty. In Pennsylvania, the contract is considered binding once it is executed with signatures. If you want an attorney to review your contract in Pennsylvania, this should be done before signing.

Under contract, Begin inspections and apply for financing.

Once the contract is finalized, we recommend that you hire a certified home inspector. You may choose to hire professionals to do inspections including structural, wood destroying insect, septic, pool, lead paint, oil tank, soil, or phase one environmental. Inspections provide you with information about your investment. They can identify aged systems, potential or existing problems, and provide you with a general education about the systems in the home you are purchasing. After the home report is reviewed, there may be issues that warrant further negotiation, credit or repair.

Your loan application should be submitted in a timely way; in New Jersey this would be after attorney review. Some buyers prefer to wait until after inspections, depending on the closing time frame. Your mortgage lender will order the appraisal on the home, and work with you on assuring that your mortgage commitment is completed within the time frame outlined on your contract. It is important to be organized and available during this time, so that if additional documents or information are needed you can make that readily available to your mortgage lender. Please visit our Financing Your Home page for additional information.

Final Steps.

Your attorney or settlement agent will order title insurance and prepare the legal documents for closing. They will also provide a list of items you will need for the closing including photo ID, proof of homeowners insurance and a copy of the HUD statement. Once the closing is scheduled, your River Valley agent will schedule the walk through, usually the day of the closing. This is an opportunity for you to check the condition of the home, confirming repairs and making sure all inclusions remained and no additional wear and tear beyond normal use. Sellers are obligated to turn the home over in “broom clean” condition, and the walk through will confirm this has occurred.

Closing.

With your attorney or settlement agents guidance you will sign the legal documents. For a buyer who finances their home purchase, this is usually done in two parts. First, you “close the loan,” and then with the proceeds from your lending institution, you “close on the house.” Be sure to bring acceptable forms of identification, even if you are personally known by everyone at the closing table. Once the documents are signed and the funds transferred and confirmed, you are handed a set of keys… Welcome to your new home!